Don’t Stop the Uber Revolution

This post originally appeared on Bloomberg View.

After landing yesterday at France's Charles de Gaulle airport, I gained some unexpected first-hand experience of a growing commercial dispute: that between traditional cab drivers and Uber, the technology that allows just about anyone with a car to get into the taxi business.

As I sat in a traffic jam created by a Europe-wide taxi strike (and, in the case of France, a rail strike, too), I had time to reflect on who was most at fault for the disruptions. Was it Uber for having introduced a disruptive technology that escapes traditional licensing requirements, cabbies for refusing to adjust to a new reality, or governments for failing to make a clear strategic choice on what the two parties' roles should be?

Uber is revolutionizing the delivery of what we conventionally think of as taxi service. Customers can use its mobile app to call a car, pay for the ride and even rate the driver. It has given drivers an easy way to go into business for themselves, and exploited a considerable stock of private cars looking for a secondary use.

Traditional taxi drivers are furious, and understandably so. They must now compete with an upstart that, importantly, does not have to meet all the costly licensing and regulatory requirements that they are obliged to meet. Disrupting roads in major cities is a very effective way to bring attention to what they see as unfair competition.

Reasonable people disagree on who is right. Some welcome Uber’s more efficient technology and consider the traditional cabbies to be Luddites. Others argue that Uber should be subject to the same licensing and regulatory requirements as taxis, to level the playing field.

The conflict won’t resolve itself. European governments will have to make a major strategic decision soon. In my view, they should recognize that the new Uber-like technologies are here to stay and expand.

While Uber should be subject to more appropriate taxation, governments would be foolish to deny that its approach enables a level of service that makes many traditional taxi regulations unnecessary. Customers, for example, can know in advance how much their ride will cost, and use reviews to assess the quality of drivers -- offsetting the need for rules aimed at preventing drivers from taking advantage of uninformed riders. So rather than subject Uber to heavy regulation, European governments should limit their interventions to basic safety issues and better tax coverage.

This is not the end of the traditional taxi industry, which will continue to play an important, albeit smaller, role in the provision of urban transportation. The industry will change, though, with more taxi drivers eventually signing up with Uber, broadening and improving the services they provide to riders.

Mohamed A. El-Erian is the former CEO and co-CIO of PIMCO. He is chief economic advisor to Allianz, chair of President Obama’s Global Development Council, and author of the NYT/WSJ bestseller “When Markets Collide.” Follow him on Twitter,@elerianm.

Photo: Phil Hilfiker/Flickr, used under a Creative Commons license.